Broker's take: DBS names stocks that could benefit from rising interest rates, regional reopening

DBS expects banks will not be the only beneficiaries from rising interest rates, and named its stock picks that can benefit from a rising rates environment and recovery trajectory.

In a report on Thursday (Oct 28), the research team expects there will be 1 to 2 interest rate hikes in 2022, amid plans by the US Federal Reserve to scale back on asset purchases from November 2021 to around mid-2022, and as central banks start to pull back from accommodative monetary policies due to the global economic recovery and inflationary pressures.

DBS said ComfortDelGro C52 will likely benefit from Singapore's endemic transition strategy.

The transport operator will likely report more resilient results going forward, and the potential listing of ComfortDelGro Australia on the Australian Securities Exchange - estimated at around US$1 billion - should unlock value of the group's Australian land transport business.

ComfortDelGro's current price, trading at 1.3 times the company's market value to its net assets, also "seems unjustifiably low", DBS said.

Yangzijiang Shipbuilding BS6 is also a beneficiary, as it rides on its record-high order wins of US$7.2 billion as at August 2021 from newbuild activities for containerships.

DBS said Yangzijiang will likely see its next wave of orders from bulk carriers in H2 2021 and from tankers in 2022, and expects its initiatives to build cleaner ships and a strategic review of its debt investment business will result in the re-rating of the stock.

Among real estate investment trusts (Reits), Suntec Reit T82U, Ascott Residence Trust HMN, CapitaLand China Trust AU8U, CDL Hospitality Trusts J85, Far East Hospitality Trust Q5T and Lendlease Global Commercial Reit JYEU should gain from both domestic and international air travel reopening.

DBS said this is "unsurprising" as the sector will likely see strong growth in its earnings per unit and distribution per unit in 2022, as more countries transition from pandemic to endemic.

The research team also highlighted stocks it expects will benefit from a reopening of key countries in South-east Asia, amid declining cases and improving vaccination rates.

Agrifood company Japfa UD2 and chocolate manufacturer Delfi P34 should see a recovery in demand for their products as restrictions in Indonesia ease. Thai Beverage Y92 may also benefit from improved alcoholic drink sales in the coming months as Thailand and Vietnam open up, DBS said.

As for rising business costs amid supply chain disruptions and high oil prices - Brent and WTI are both trading near multi-year highs above US$80 per barrel - Keppel Corporation BN4 and CSE Global 544 are DBS's preferred picks to ride this trend.

The research team thinks both companies could see higher oil and gas as well as commodity-related orders, especially as Keppel's offshore and marine unit may merge with Sembcorp Marine.

Keppel Electric could also gain in the medium term as the retail electricity sector has consolidated, boosting its market share.

Additionally, DBS prefers Bumitama Agri P8Z as it rides on the trend of higher crude palm oil prices. The stock is a laggard compared to First Resources, whose share price has risen past pre-pandemic levels, and it should likely see strong results in H2 due to a lack of hedged crude palm oil sales volumes, said DBS.

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